<< The logic for the standard view basically starts and ends with the observation that an investor can hold individual bonds to maturity while bond funds don't necessarily hold all bonds until they mature. Most bond fund managers trade their assets periodically.>>

In the end, that's actually what it comes down to. An individual bond investor can choose not to buy when bonds are overpriced or sell when conditions are not favorable. Unless he puts a lot of money into the junk bonds of companies that go bust, he should come out ahead of the bond manager who doesn't have the same freedoms.

It's not only that ... an individual bond owner can choose to make his own decisions, a bond fund owner doesn't have that luxury. If the fund has a billion dollars and people redeem half of that, the fund manager MUST sell half the holdings right then, regardless of market conditions. This obviously doesn't apply to closed-end funds.